Monday, October 26th
Neha Upadhayay (Université Paris-Est Créteil), “Medicine with side effects – Foreign aid and targeted protection”
Foreign Aid, in theory, is expected to mitigate constraints that impede the economic development of recipient countries. At the same time that help is committed, donors are seemingly taking actions which are harmful to developing economies in obvious ways. An example is the tacit circumvention of the putative rules-based global trading system through contingent protection activities.
In this paper, it is postulated that on one hand Aid for Trade (AfT) is expected to have positive impact on the exports of the aid recipients by better integration into the global trading order, while, on the other hand, aid provider (donor) curtails access to its own markets by actuating contingent protection against the recipient (exporter).
We use a large dataset of donors and recipients for recent years (2001 to 2018) to examine the extent to which AfT has led to a rise in contingent protection subsequent to the mainstreaming of recipient countries into the global trading order purportedly as a result of AfT benefits. This paper finds a significant and positive impact of AfT on the surge in contingent protection activities which is entirely driven by the aid for economic infrastructure and services while the other main category of AfT- production sector has no discernible effect on rise in protection against the recipient of aid.